Fertiliser industry denies windfall gains

The Fertiliser Association of India (FAI) today denied the industry had made “windfall gains” by misusing the subsidy regime. It was alleged these gains led to a loss of Rs 1,000 crore to the exchequer in 2011-12.

Earlier, reports had suggested Minister of State for Chemicals and Fertilisers Srikant Jena had written five notes to Minister of Chemicals and Fertilisers M K Alagiri on the misuse of fertiliser subsidies by the industry, under the nutrient-based regime. However, in their clarifications, the association officials named neither Jena nor Alagiri.

According to reports, Jena had written to Alagiri between March and August 2012, when prices of fertilisers had seen a steep rise, despite subsidies by the Centre to keep the prices low.

FAI said the fertiliser industry hadn’t lobbied for the nutrient-based subsidy regime, adding the scheme was introduced after numerous studies and discussions at various levels. “We are in favour of direct transfer of fertiliser subsidy to farmers and request and lobby to relieve us from the responsibility of routing subsidy through us,” said FAI Director General Satish Chander.

FAI officials said last year, the rupee’s depreciation had increased the margins of fertiliser dealers. This, coupled with the increased interest outgo for the industry due to delayed payments from dealers and the delay in subsidy, might have resulted in the rise in prices, they said.

Reports had said Jena had suggested of the subsidy of Rs 16,000 to Rs 18,000 per tonne released by the government for complex fertilisers in 2011-12, companies had pocketed about Rs 5,500 of the subsidy per tonne. The industry denied this, saying the entire profit for the di-ammonium phosphate (DAP) and muriate of potash (MOP) business in the country for 2011-12 stood at Rs 1,560 crore, which, according to the allegations, would mean the industry’s entire profit was accounted for by misusing the subsidy regime alone.

The government had reduced subsidy from Rs 16,000-18000 a tonne of nutrient in 2011-12 to about Rs 14,000 in 2012-13 and, therefore, prices had to rise to account for the difference, the industry said.

It was also reported Jena had alleged the industry had offloaded DAP and MOP in the market before March 31 2012, as the subsidy was scheduled to be reduced from 2012-13. The association officials justified the move, saying this was done to maintain the prices of DAP and MOP at February 2012 levels of about Rs 18,000 a tonne. The officials said had the industry not taken this step, prices would have skyrocketed from April 1.